Section 1324 of the Food Security Act of 1985
 

Pub. L. 99–198, 99 Stat. 1535, 7 U.S.C. 1631 

As amended by Sec. 662 of the Federal Agriculture Improvement and Reform Act of 1996, 

Sec. 10604 of the Farm Security and Rural Investment Act of 2002, and Sec. 776 of the 

Consolidated Appropriations Act, 2005. 

Protection For The Purchasers of Farm Products 

SEC. 1324. (a) Congress finds that— 

(1) certain State laws permit a secured lender to enforce liens against a purchaser of 

farm products even if the purchaser does not know that the sale of the products violates 

the lender’s security interest in the products, lacks any practical method for discovering 

the existence of the security interest, and has no reasonable means to ensure that the 

seller uses the sales proceeds to repay the lender; 

(2) these laws subject the purchaser of farm products to double payment for the 

products, once at the time of purchase, and again when the seller fails to repay the 

lender; 

(3) the exposure of purchasers of farm products to double payment inhibits free 

competition in the market for farm products; and 

(4) this exposure constitutes a burden on and an obstruction to interstate commerce in 

farm products. 

(b) The purpose of this section is to remove such burden on and obstruction to interstate 

commerce in farm products. 

(c) For the purpose of this section— 

(1) The term “buyer in the ordinary course of business” means a person who, in the 

ordinary course of business, buys farm products from a person engaged in farming 

operations who is in the business of selling farm products. 

(2) The term “central filing system” means a system for filing effective financing 

statements or notice of such financing statements on a statewide basis and which has 

been certified by the Secretary of the United States Department of Agriculture; the 

Secretary shall certify such system if the system complies with the requirements of this 

section; specifically under such system— 

(A) effective financing statements or notice of such financing statements are filed 

with the office of the Secretary of State of a State; 

(B) the Secretary of State records the date and hour of the filing of such 
statements; 

(C) the Secretary of State compiles all such statements into a master list— 

(i) organized according to farm products; 

(ii) arranged within each such product— 

(I) in alphabetical order according to the last name of the individual 

debtors, or, in the case of debtors doing business other than as 

individuals, the first word in the name of such debtors; and 

(II) in numerical order according to the social security number, or other 

approved unique identifier, of the individual debtors or, in the case of 

debtors doing business other than as individuals, the Internal Revenue 

Service taxpayer identification number, or other approved unique 

identifier, of such debtors; and 

(III) geographically by county or parish; and 

(IV) by crop year; 

(iii) containing the information referred to in paragraph (4)(C); 

(D) the Secretary of State maintains a list of all buyers of farm products, 

commission merchants, and selling agents who register with the Secretary of State, 

on a form indicating— 

(i) the name and address of each buyer, commission merchant and selling 

agent; 

(ii) the interest of each buyer, commission merchant, and selling agent in 

receiving the lists described in subparagraph (E); and 

(iii) the farm products in which each buyer, commission merchant, and 

selling agent has an interest; 

(E) the Secretary of State distributes regularly as prescribed by the State to each 

buyer, commission merchant, and selling agent on the list described in 

subparagraph (D) a copy in written or printed form of those portions of the master 

list described in paragraph (C) that cover the farm products in which such buyer, 

commission merchant, or selling agent has registered an interest; 

(F) the Secretary of State furnishes to those who are not registered pursuant to 

(2)(D) of this section oral confirmation within 24 hours of any effective financing 

statement on request followed by written confirmation to any buyer of farm 

products buying from a debtor, or commission merchant or selling agent selling for 

a seller covered by such statement. 

(3) The term “commission merchant” means any person engaged in the business of 

receiving any farm product for sale, on commission, or for or on behalf of another 
person. 

(4) The term “effective financing statement” means a statement that— 

(A) is an original or reproduced copy of the statement, or, in the case of a State 

which (under the applicable State law provisions of the Uniform Commercial 

Code) allows the electronic filing of financing statements without the signature of 

the debtor, is an electronically reproduced copy of the statement; 

(B) other than in the case of an electronically reproduced copy of the statement, is 

signed, authorized, or otherwise authenticated by the debtor, and filed with the 

Secretary of State of a State by the secured party; 

(C) contains, 

(i) the name and address of the secured party; 

(ii) the name and address of the person indebted to the secured party; 

(iii) the social security number, or other approved unique identifier, of the 

debtor or, in the case of a debtor doing business other than as an individual, 

the Internal Revenue Service taxpayer identification number, or other 

approved unique identifier, of such debtor; and 

(iv) a description of the farm products subject to the security interest created 

by the debtor, including the amount of such products where applicable, and 

the name of each county or parish in which the farm products are produced or 

located; 

(D) must be amended in writing, within 3 months, similarly signed, authorized, or 

otherwise authenticated by the debtor and filed, to reflect material changes; 

(E) remains effective for a period of 5 years from the date of filing, subject to 

extensions for additional periods of 5 years each by refiling or filing a continuation 

statement within 6 months before the expiration of the initial 5 year period; 

(F) lapses on either the expiration of the effective period of the statement or the 

filing of a notice signed, authorized, or otherwise authenticated by the secured 

party that the statement has lapsed, whichever occurs first; 

(G) is accompanied by the requisite filing fee set by the Secretary of State; and 

(H) substantially complies with the requirements of this subparagraph even though 

it contains minor errors that are not seriously misleading. 

(5) The term “farm product” means an agricultural commodity such as wheat, corn, 

soybeans, or a species of livestock such as cattle, hogs, sheep, horses, or poultry used or 

produced in farming operations, or a product of such crop or livestock in its 

unmanufactured state (such as ginned cotton, wool-clip, maple syrup, milk, and eggs), 

that is in the possession of a person engaged in farming operations. The term ‘approved 
unique identifier’ means a number, combination of numbers and letters, or other 

identifier selected by the Secretary of State using a selection system or method approved 

by the Secretary of Agriculture. 

(6) The term “knows” or “knowledge” means actual knowledge. 

(7) The term “security interest” means an interest in farm products that secures payment 

or performance of an obligation. 

(8) The term “selling agent” means any person, other than a commission merchant, who 

is engaged in the business of negotiating the sale and purchase of any farm product on 

behalf of a person engaged in farming operations. 

(9) The term “State” means each of the 50 States, the District of Columbia, the 

Commonwealth of Puerto Rico, Guam, the Virgin Islands of the United States, 

American Samoa, the Commonwealth of the Northern Mariana Islands, or the Trust 

Territory of the Pacific Islands. 

(10) The term “person” means any individual, partnership, corporation, trust, or any 

other business entity. 

(11) The term “Secretary of State” means the Secretary of State or the designee of the 

State. 

(d) except as provided in subsection (e) and notwithstanding any other provision of Federal, 

State, or local law, a buyer who in the ordinary course of business buys a farm product from a 

seller engaged in farming operations shall take free of a security interest created by the seller, 

even though the security interest is perfected; and the buyer knows of the existence of such 

interest. 

(e) A buyer of farm products takes subject to a security interest created by the seller if— 

(1)	 (A) within 1 year before the sale of the farm products, the buyer has received from 

the secured party or the seller written notice of the security interest organized 

according to farm products that— 

(i) is an original or reproduced copy thereof; 

(ii) contains, 

(I) the name and address of the secured party; 

(II) the name and address of the person indebted to the secured party; 

(III) the social security number, or other approved unique identifier, of 

the debtor or, in the case of a debtor doing business other than as an 

individual, the Internal Revenue Service taxpayer identification 

number, or other approved unique identifier, of such debtor; and 

(IV) a description of the farm products subject to the security interest 

created by the debtor, including the amount of such products where 
applicable, crop year, and the name of each county or parish in which 

the farm products are produced or located; 

(iii) must be amended in writing, within 3 months, similarly signed, 

authorized, or otherwise authenticated and transmitted, to reflect material 

changes; 

(iv) will lapse on either the expiration period of the statement or the 

transmission of a notice signed, authorized, or otherwise authenticated by the 

secured party that the statement has lapsed, whichever occurs first; and 

(v) contains any payment obligations imposed on the buyer by the secured 

party as conditions for waiver or release of the security interest; and 

(B) the buyer has failed to perform the payment obligations, or 

(2) in the case of a farm product produced in a State that has established a central filing 

system— 

(A) the buyer has failed to register with the Secretary of State of such State prior to 

the purchase of farm products; and 

(B) the secured party has filed an effective financing statement or notice that 

covers the farm products being sold; or 

(3) in the case of a farm product produced in a State that has established a central filing 

system, the buyer— 

(A) receives from the Secretary of State of such State written notice as provided in 

subsection (c)(2)(E) or (c)(2)(F) that specifies both the seller and the farm product 

being sold by such seller as being subject to an effective financing statement or 

notice; and 

(B) does not secure a waiver or release of the security interest specified in such 

effective financing statement or notice from the secured party by performing any 

payment obligation or otherwise. 

(f) What constitutes receipt, as used in this section, shall be determined by the law of the State 

in which the buyer resides. 

(g) (1) Except as provided in paragraph (2) and notwithstanding any other provision of 

Federal, State, or local law, a commission merchant or selling agent who sells, in the 

ordinary course of business, a farm product for others, shall not be subject to a security 

interest created by the seller in such farm product even though the security interest is 

perfected and even though the commission merchant or selling agent knows of the 

existence of such interest. 

(2) A commission merchant or selling agent who sells a farm product for others shall be 

subject to a security interest created by the seller in such farm product if— 
(A) within 1 year before the sale of such farm product the commission merchant or 

selling agent has received from the secured party or the seller written notice of the 

security interest; organized according to farm products, that— 

(i) is an original or reproduced copy thereof; 

(ii) contains, 

(I) the name and address of the secured party; 

(II) the name and address of the person indebted to the secured party; 

(III) the social security number, or other approved unique identifier, of 

the debtor or, in the case of a debtor doing business other than as an 

individual, the Internal Revenue Service taxpayer identification 

number, or other approved unique identifier, of such debtor; and 

(IV) a description of the farm products subject to the security interest 

created by the debtor, including the amount of such products, where 

applicable, crop year, and the name of each county or parish in which 

the farm products are produced or located; 

(iii) must be amended in writing, within 3 months, similarly signed, 

authorized, or otherwise authenticated and transmitted, to reflect material 

changes; 

(iv) will lapse on either the expiration period of the statement or the 

transmission of a notice signed, authorized, or otherwise authenticated by the 

secured party that the statement has lapsed, whichever occurs first; and 

(v) contains any payment obligations imposed on the commission merchant 

or selling agent by the secured party as conditions for waiver or release of the 

security interest; and 

(B) the commission merchant or selling agent has failed to perform the payment 

obligations; 

(C) in the case of a farm product produced in a State that has established a central 

filing system— 

(i) the commission merchant or selling agent has failed to register with the 

Secretary of State of such State prior to the purchase of farm products; and 

(ii) the secured party has filed an effective financing statement or notice that 

covers the farm products being sold; or 

(D) in the case of a farm product produced in a State that has established a central 

filing system, the commission merchant or selling agent— 

(i) receives from the Secretary of State of such State written notice as 

provided in subsection (c)(2)(E) or (c)(2)(F) that specifies both the seller and 
the farm products being sold by such seller as being subject to an effective 

financing statement or notice; and 

(ii) does not secure a waiver or release of the security interest specified in 

such effective financing statement or notice from the secured party by 

performing any payment obligation or otherwise. 

(3) What constitutes receipt, as used in this section, shall be determined by the law of the 

State in which the buyer resides. 

(h) 

(1) A security agreement in which a person engaged in farming operations creates a 

security interest in a farm product may require the person to furnish to the secured party 

a list of the buyers, commission merchants, and selling agents to or through whom the 

person engaged in farming operations may sell such farm product. 

(2) If a security agreement contains a provision described in paragraph (1) and such 

person engaged in farming operations sells the farm product collateral to a buyer or 

through a commission merchant or selling agent not included on such list, the person 

engaged in farming operations shall be subject to paragraph (3) unless the person— 

(A) has notified the secured party in writing of the identity of the buyer, 

commission merchant, or selling agent at least 7 days prior to such sale; or 

(B) has accounted to the secured party for the proceeds of such sale not later than 

10 days after such sale. 

(3) A person violating paragraph (2) shall be fined $5,000 or 15 per centum of the value 

or benefit received for such farm product described in the security agreement, whichever 

is greater. 

(i) The Secretary of Agriculture shall prescribe regulations not later than 90 days after the date 

of enactment of this Act to aid States is the implementation and management of a central 

filing system. 

(j) This section shall become effective 12 months after the date of enactment of this Act. 

Last updated February 15, 2005 

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